California Cannabusinesses Standing By

California Cannabusinesses Standing By on Regulations With Only Weeks to Confirm Compliance

As the deadline for California rolling out it’s recreational cannabis program approaches – with literally the whole world watching – regulators worked through a series of moves earlier this year and added a few more adjustments mid-year in an effort to quickly get everybody on the same page.

Earlier this year, the California Department of Food and Agriculture’s (CDFA) CalCannabis Cultivation Licensing program, the Department of Consumer Affairs’ Bureau of Cannabis Control, and the Department of Public Health released draft regulations for the Medical Cannabis Regulation and Safety Act (MCRSA) of 2015.

In late June, Governor Jerry Brown signed the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA, also known as Senate Bill 94), which creates one regulatory system for both medical and adult-use cannabis, and, at the same time, repealed the MCRSA.

The licensing authorities held several public hearings to accept verbal and written comments about the proposed draft regulations originally introduced in the repealed bill, and planned to move forward with a separate draft regulatory package for implementation of MAUCRSA.

The three licensing authorities have met and are in the process of drafting emergency regulations based on MAUCRSA to be published sometime in November, incorporating the public comments they got on the proposed medical cannabis regulations.

That new bill triggered a lot regulatory moves in the last couple of months, especially in cultivation licensing, with more decisions to come, causing cannabusinesses to scramble to get their operations compliant with regulations that in some cases won’t be revealed until just a few weeks before temporary licenses will be issued.

The MCRSA proposed regulations are the starting point for regulators going forward to create new regulations for the MAUCRSA, and give an insight into what regulators want to know.

MCRSA mandated that the Medical Cannabis Cultivation Program regulate, implement and enforce the act regarding the cultivation of medical cannabis, and spelled out regulations for environmental issues to prevent water pollution and endangerment of wildlife, and protect public health and safety.

Some of the public comments during the development of the MCRSA regulations included concerns about the definition of “mixed light”, as well as “outdoor” and “indoor”. Stakeholders suggested that light deprivation practices should be permitted in the outdoor category.

Recommendations were also made to reduce the watts per square foot threshold, and clearly differentiate the use of supplemental light preventing plants from flowering from the use of high intensity lighting supporting flower production. Stakeholders suggested a separate tier license for light deprivation.

The CDFA concluded at that time that “It is clear to the department that the cultivation category definitions will require further refinement.” In other words, we’re still working on it.

Other public comments included concerns about application and licensing fees, with some saying the fees were too high and asking for payment plans. “As the true costs of running the program becomes known to the Department, it is anticipated these fees will fluctuate. It is also anticipated that fees published in the draft medical regulations will be revised to reflect the current known costs of the Department,” the CDFA stated.

Cannabis waste disposal was another subject of discussion, with many saying that the requirements of the proposed regulations were too difficult and asking to process their waste off-site.

Regulations about having 42 percent renewable energy sources for indoor grows was another issue, with the decision to phase in the requirements of that regulation to be decided at a later date.

Applications for licenses will be available shortly after the bureau has released their new draft regulations for MAUCRSA, which are expected to be released in November, 2017, with additional public comment likely to follow.

But for cultivators, there’s more to work through.

For example, also in the works for cultivation licensees to consider is an environmental impact report. A draft of the Program Environmental Impact Report (PEIR) was prepared in mid-June, with a 45-day period for public comment ending on July 31. The report included findings on issues such as energy use and greenhouse emissions; land use and planning; noise; transportation and traffic; and 10 other topics of discussion.

The final PEIR report is due out by the end of the year. In other words, better watch for it and be ready to respond.

CAL recently released a checklist in advance of the granting of state temporary cannabis cultivation licenses, which they will begin issuing in January, 2018. A temporary license is a conditional license that allows a business to engage in commercial cannabis activity for a period of 120 days. CAL can only issue a temporary license if the applicant has a valid license, permit, or other authorization issued by the local jurisdiction.

Among those items on the checklist that cultivator operators need to have are documents demonstrating that they are legally doing business in the state (lease or title agreement, a seller’s permit, and business formation documents from the state), and that they have a verifiable water source and a state-approved source of fingerprinting proof.

The checklist also advised cultivator license seekers to understand the various city and county laws regarding their cannabis business and permit by reviewing building department, environmental health, planning department, law enforcement and others. The CDFA and CAL are providing ten training sessions for California cultivators between the end of November and mid-December.. not a lot of time to get your act together.

So for now, it’s an uneasy wait-and-see moment for cannabusinesses in California until draft regulations are released in November. Many will have to keep a close eye on the exact release day, quickly review what they need to do to be compliant, make any changes in a matter of weeks, and submit their applications sometime after the regulations are released and before January, 2018… some with millions of dollars at stake in one of the biggest cannabis markets in the world.

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In 2014 with the legalization of Marijuana, Jeff and his team have committed themselves to knowing as much about the industry and being there to offer Cannabis Compliant, Accounting, Tax & Insurance to business owners that have or need help in keeping in with the Federal government's "280E"